June 28, 2007
China seeks Venezuelan oil

(Bloomberg) - "China Petrochemical Corp., the nation's second-largest oil producer, is in talks to drill in Venezuela, where ConocoPhillips and Exxon Mobil Corp. pulled out.

The company is seeking 'heavy oil' projects, said Tong Peixin, a spokesman for unit Sinopec International Petroleum Exploration & Production Corp., a reference to tarry deposits in an Orinoco River basin area known as the Faja and to fields lying off the Caribbean coast that may hold 316 billion barrels. China Petrochemical is known as Sinopec Group.

China has strengthened links with Venezuela as part of efforts to secure energy supplies for the world's fastest-growing major economy. The countries signed $11 billion of energy and transportation accords last August when Chávez visited China (...)

Beijing-based China Petrochemical was among seven foreign oil companies to sign agreements with Petróleos de Venezuela SA on June 26, the state-owned Shanghai Securities News reported.

Zhang Zheng, a Beijing-based spokesman for Sinopec Group, declined to comment.

ConocoPhillips and Exxon will quit their Venezuelan projects after the failure of talks with Chávez's government, oil minister Rafael Ramírez said on June 26. Chevron Corp., Statoil ASA, Total SA and BP Plc agreed terms with Venezuela and will continue heavy-oil operations.

Sinopec Group will take 32 percent of the Posa exploration project in the eastern part of the Gulf of Paria, off Venezuela's northwest coast near Trinidad . Petróleos de Venezuela will own 60 percent, and Venezuelan construction company Inelectra 8 percent, the oil ministry in Caracas said this week.

Ramírez plans to submit plans for a new joint venture with China to the country's legislature to produce upgraded crude oil instead of orimulsion, using existing agreements between the two countries, the ministry said.

Production of orimulsion, an alternative boiler fuel, stopped Dec. 31 at a venture between Petróleos de Venezuela and China National Petroleum Corp. when the government elected to free up heavy oil for more profitable uses.

China will invest $2 billion in Venezuela's oil industry, including developing the Junin oilfield, in which China National Petroleum, the country's biggest oil producer, has an interest, Chávez said Aug. 25.

China Petroleum & Chemical Corp., or Sinopec Corp., may cooperate with Venezuela's state petrochemical company Pequiven to build a petrochemical plant in the country, Pequiven President Saul Ameliach said Aug. 23.

ConocoPhillips and Exxon Mobil failed to reach an agreement on remaining in the country after Petróleos de Venezuela unilaterally took over at least 60 percent of heavy oil projects, where the state oil company previously held minority stakes.

Petróleos de Venezuela will have stakes of 60 percent to 83 percent in ventures with the four remaining foreign oil producers, according to the company's June 26 statement.

The Faja del Orinoco, a region of tarry, shallow oil, is among the world's biggest deposits of crude. Petróleos de Venezuela said last month it certified 30.7 billion barrels of oil in place in one exploration area, putting the country closer to its goal of certifying 316 billion barrels of reserves.

Orimulsion, a replacement for fuel oil to burn in power plants, is derived from the bitumen that occurs naturally in the Orinoco belt. It is changed to a mixture of 70 percent bitumen and 30 percent water for transportation by tanker.